Definition ∞ BTC Supply Contraction describes a reduction in the available Bitcoin for active trading. This phenomenon occurs when coins move from liquid exchange wallets to self-custody or long-term holding addresses. It signifies a decrease in the immediate sell-side pressure within the market. This supply reduction can precede periods of upward price movement if demand remains constant or increases.
Context ∞ BTC Supply Contraction is a closely monitored on-chain metric, often indicating a shift in investor behavior towards accumulation. Its situation often becomes a central topic during market uptrends, as it suggests a diminishing float available for purchase. A critical future development to watch is how large institutional allocations continue to affect the measurable supply, potentially leading to sustained contractions.
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